Employers may see hike in jobless-benefits tax

State senators have given final approval to a plan to hike unemployment taxes on all Arizona companies. And they're doing it with the blessing of the business community.

The legislation would impose a special assessment on all employers for the balance of this year. While the exact rate will be worked out, legislators said the intent is to cap that at $28 per worker.

Then next year, with the presumption that the economy will have improved and employers will have more money, the rate would jump to $42.

Marc Osborn, lobbyist for the Arizona Chamber of Commerce and Industry, said it's not that businesses, which already are struggling, want to pay more. It's just that the alternative is worse.

The need exists because the trust fund, which pays the benefits, went broke last year.

That fund, which at one time had more than $1 billion, is financed through a tax on the first $7,000 of each worker's salary. While the exact premium depends on each employer's record of firing or laying off workers, the average company pays about $145 a year.

What happened is that the recession, and the high unemployment in Arizona, which topped 10 percent last year, lasted longer than anticipated. So the state, to keep meeting its obligations, had to borrow money from the federal government.

Last year the money came without interest. But now the state is having to pay at a rate running at about 4 percent.

What's worse, Osborn said, is if Arizona still owes money at the end of 2012, the federal government can come in and demand a quick repayment. And that, he said, would mean an even bigger - and unpredictable - spike in employer costs.

"The penalties from the federal government are very steep," Osborn said, perhaps in the neighborhood of $200 for each worker.

At one point the state was nearly $600 million in the red.

Steve Meissner, spokesman for the Arizona Department of Economic Security, said the debt is now about $336 million. But he said borrowing does continue: While the state takes in about $250,000 a week, it is still paying out about $7 million a week in benefits.

As of April 5, the state owes close to $3 million in interest.

House Bill 2619 does contain a provision that lets DES increase next year's assessment if it looks as if Arizona won't pay off the loan before 2013.

Sen. Ron Gould, R-Lake Havasu City, was one of eight who voted against the measure.

"I'd like to know who borrowed money in my name," he asked. DES officials said the move was necessary to meet the legal obligations to pay the benefits.